The question of the century!
What the frell is that thing on Rosencrantz' lip? Since Vagrant Story's release, this has probably been the biggest mystery about Jan. Goes to prove that everyone is a graphics whore who care more about minor details than plot questions. Including me!
Below I'm going to throw some theories up in the air, and see what sticks. Onward!

Gangly pimple? Ickosis!
First, let's take a peek at the official character art. Here, it almost looks like a scar on the edge of his lip, which would make sense considering Rosencrantz' dangerous occupation. Maybe it was misinterpreted by the 3D artists into something else?
But many see 'it' as a pimple. This also fits, considering what Sydney says to Ashley after Ashley's first meeting with Rosencrantz: "Hmm... you reek, Riskbreaker. What is that stench? Ah, you met Rosencrantz." This gives the overwhelming impression that Rosencrantz is unhygenic. (however, Sydney could've been speaking metaphorically; a foul 'stench' coming from Ashley's contact with Rosencrantz' wretched soul) Jan also looks kinda sleazy; who knows what kind of diseases he could've picked up in the back alleys of Valendia or the Graylands.
Piercing?
Another prime theory is that it's a piercing of some sort. As you can see in this in-game pic, 'it' has a yellow shade to it, possibly a gold ring or stud? Considering his taste for pain and bondage (he's got more string wrapped around him than a thanksgiving turkey!), it wouldn't be surprising for Jan to have gone out and pierced his lip. Very 'underground', plus the world of Vagrant Story seems slightly more hospitable to piercings and tattoos than your average game world. Personally, I'm hoping it's this, because the thought of a weird yellow pus-filled thing is really really gross.
Or is there really anything at all?
While it's obvious that something is there, is it really meant to be anything at all? Could that little line on his lip in the the character design have been an errant pencil sketch that snowballed into a more visible thing in the finished product? Probably not, but the potential for it to be a chain of errors is still there, however unlikely.
What do you think?
Well, I've laid out the facts, what do you think? Vote in my poll! You can check the results occasionally, and I'll post an update in a couple of weeks with the results.

Images obtained from
The Gaming Intelligence Agency
, and
Vagrant Story.com